PTC urges tax on cigarette paper

Company calls for stricter enforcement, tax adjustments to plug revenue losses as illicit market share hits 58%

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ISLAMABAD:

The Pakistan Tobacco Company (PTC) has urged the government to impose an adjustable tax on cigarette paper in a bid to ensure full documentation of the cigarette industry and combat the rapidly growing illicit trade, which it says has now become the market leader.

At a pre-budget media briefing, PTC Director Asad Shah expressed serious concern over the rise in untaxed cigarettes, calling for uniform implementation of the track-and-trace tax stamp policy. Without uniform enforcement, he argued, the policy is ineffective.

Shah also proposed reducing the adjustable tax on cigarette filter material acetate tow from Rs44,000 per kilogram to Rs4,000 per kilogram to discourage smuggling. Authorities seized 450 metric tonnes of smuggled acetate tow this year alone, he added.

Shah also proposed that adjustable tax should be imposed on cigarette paper to ensure complete documentation.

He noted that illicit cigarettes now account for 58% of the total market, with Pakistan's annual cigare tte consumption estimated at 82 billion sticks. Shah claimed that the sector has the potential to generate Rs570 billion in tax revenue annually, but only Rs292 billion was collected in FY2023-24 and Rs223 billion so far in the first 11 months of the current fiscal year.

"It is impossible to collect the remaining Rs50 billion in a single month," he said, pointing to widespread tax evasion and the alleged involvement of some non-governmental organisations (NGOs) pursuing specific agendas.

Shah recalled that 12 years ago, the government taxed 67 billion sticks annually. That number has now dropped to just 34 billion, despite consistent or growing demand. He criticised the 2023 tax policy, saying it led to the second decline in government revenue from the sector in a decade.

Despite holding only a 42% market share, the legal tobacco sector still contributes 98% of the revenue, Shah said. He urged authorities to enforce documentation requirements across the board, stressing that 18 billion sticks are being sold at or below Rs150 per pack—below the official minimum price of Rs162.25 — without any penalties for violators.

He pointed out that no one has ever been penalised for violating the minimum price law and instead recommended raising the minimum price per pack to counter the perception of cigarettes being cheap in Pakistan.

"No policy can succeed without non-discriminatory implementation," he said, adding that untaxed, locally manufactured cigarettes are still openly sold.